A university education is a valuable asset, so you should pay for it

Now that most A-level students know whether they have a place to study for their degree in bagpipe music or embroidery, what of the institutions to which they will take their CD collection, coloured-fascia mobile phone and body studs this September? The first point to establish is that Britain's universities are not in crisis. Most of today's A-level students will receive a good-quality higher education. In addition, many of them will discover a lot about themselves and grow in social confidence, and most will even have a good time.

Now that most A-level students know whether they have a place to study for their degree in bagpipe music or embroidery, what of the institutions to which they will take their CD collection, coloured-fascia mobile phone and body studs this September? The first point to establish is that Britain's universities are not in crisis. Most of today's A-level students will receive a good-quality higher education. In addition, many of them will discover a lot about themselves and grow in social confidence, and most will even have a good time.

British universities are, however, approaching a point of decision. With the possible exceptions of Cambridge, London and Manchester, they are being overtaken by rivals elsewhere in the world.

Largely, as with so much else in life, this comes down to money. Universities need to pay their best staff more if they are to reverse the brain drain, especially to the United States. They need to invest more, especially in new technology and projects such as combining internet-based distance learning with shorter residential courses. And we want, as a society, to continue to increase student numbers.

The big question, then, is where the additional money could come from. This country is not blessed, like the US, with charitable endowments of gargantuan size. There are only two realistic sources: the taxpayer and the beneficiaries of higher-quality universities themselves, namely future graduates. In the past decade, we have seen a shift in the burden to the latter, with the introduction by the Conservatives of student loans and by Labour of means-tested tuition fees. There are serious flaws in both, but there should be no doubt that the direction of change is right.

It would certainly be simpler to recover the cost of increased investment in universities from a more progressive income tax on high-earners, whether graduates or not. But the politics of income tax is suffused with so much irrationality that this is a non-starter. There is also an important question of fairness between the generations: why should today's taxpayers pay for tomorrow's graduates to earn vastly more than their non-graduate peers? Especially when, even assuming that access to universities becomes more open, the benefits will be skewed towards the children of the better-off?

The trick is to devise a system that ensures that the burden falls on those who benefit, without deterring able students from poorer (or simply debt-averse) backgrounds. The Government has failed dismally to get over the message that student loans do not have to be repaid unless and until a graduate can afford to do so.

That should be the principle - whether or not it is called a graduate tax or a soft loan - underpinning increased investment in the future. On that basis, therefore, we ought not to be afraid of further moves towards charging the full cost of tuition. Just as Chris Woodhead, the chief inspector of schools, should not sneer at degrees in golf-course management, we should leave it to students themselves to decide which courses will serve them best in later life, and how much they are prepared to pay for them if - and only if - they end up earning more than non-graduates.

That inevitably means that an "Ivy League" of the best universities will charge more. We should not fear that either, although it demands a cultural shift towards a more American attitude - that a good education is a valuable asset on which a price can and should be put. Meanwhile, however, the universities - and not just those already richly endowed - need to adopt a more professional approach to fundraising to help pay for bursaries to draw in talented students from communities still resistant to such ideas.

Tomorrow's generations of A-level students deserve to go on to better universities than today's, but they must be persuaded to pay for them.